Full Comment’s Araminta Wordsworth brings you a daily round-up of quality punditry from across the globe. Today: The deputy governor of the Bank of England may have been “blue-skying” when he suggested Britain’s central bank might bring in negative interest rates, but he’s managed to spook a fair number of people.

In theory, negative interest rates would encourage banks to make more loans to customers, instead of sitting on piles of cash. They would be charged for money left on deposit with the central bank.

In practice, it would more likely mean customers would suffer — banks could charge you for looking after your money. And even if they didn’t do that, they would find new fees to make up the difference.

About the only winners would be people with tracker mortgages, the British equivalent of the variable rate mortgage. But any benefit would be curbed as most of these mortgages have a collar, limiting the extent of any savings.

Paul Tucker’s cockamamie idea sounds more than a cry of desperation than a carefully thoughout plan, as the British economy spirals towards recession and the country loses its blue-chip credit rating. It all makes stashing cash under the mattress or in the cookie jar look like practising fiscal responsibility. For Tricia Phillips in the Daily Mirror, it’s another example of bankerly bafflegab.

Only a banker could dream up negative interest — a charge for looking after your money.But that’s what Bank of England deputy governor Paul Tucker is suggesting. It’s his way of getting high street banks to finally start lending and avoid a penalty. Negative interest rates would mean the central bank charges high street banks to hold their money, rather than paying them the base rate of 0.5%.So they would be better off lending the cash. And this could all just apply to banks. The actual base rate – used to set customers’ mortgage and savings interest rates – could stay positive. The aim is to boost growth, instead of cash reserves. But experts warn that banks would simply find other ways to recoup any lost revenue.

Also in the Mirror, Ros Altmann, a former pensions advisor to the governmentm explains why negative interest rates won’t work.

Contemplating negative interest rates sounds like desperate measures from desperate policymakers. We’ve tried low rates and it hasn’t worked. So surely it’s time for new thinking, not more of the same. The Bank of England’s whole policy has revolved around lower interest rates: never mind savers or pensioners, we have to help borrowers and banks. But hitting savers and [old age pensioners] hard has slashed their spending. And banks will simply find new places to put their money – and still refuse to lend to small firms. We need policies to support growth directly to restore confidence. The sooner the Bank recognises its medicine is not working, the better. Doubling the dose would be futile.

As Andrew Oxlade recalls in The Daily Telegraph, experiments elewhere with this dodge have not been hugely successful.

Sweden, Denmark, Switzerland and Japan have all given negative rates of a sort of a go, mostly in the recent financial crisis. Japan has been dabbling in stimulus measures for more than two decades. Its “economic miracle” – its post-war boom – was ended by a banking crisis in 1989. It has since built up colossal government debts. A negative central bank rate in 1998 failed to solve its problems. [The Bank of England] has tried a number of ways to kick-start Britain’s recovery and, with continuing economic stagnation, the bank is thinking up more imaginative options.

The Brits are not alone in eying negative interest rates. Last summer two U.S. economists floated the idea in a Federal Reserve note, subtitled Be Careful What Your Wish For, reported Peter Coy at Bloomberg Businessweek. The idea would shake up the financial system in ways that may not be immediately obvious, Kenneth Garbade and Jamie McAndrews concluded. For example:

• The largest denomination bill available today is the $100 bill. It would take 10,000 such bills to make $1-million. Ten thousand bills take up a lot of space, are costly to transport, and present significant security problems.” • Special-purpose banks would spring up, holding nothing but cash “in a very large vault.” • A taxpayer might choose to make large excess payments on her quarterly estimated federal income tax filings, with the idea of recovering the excess payments the following April. • A credit card holder might choose to make a large advance payment and then run down his balance with subsequent expenditures, reversing the usual practice of making purchases first and payments later. • I might even go to my bank and withdraw funds in the form of a certified check made payable to myself, and then put that check in a drawer.

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